Are You the Ideal Tenant?

Good Land-Leasing Relationships Require Honesty, Transparency

Zach (left) and Dean Adams work year-round to communicate on a regular basis with their nearly 35 landowners and farm managers. (Progressive Farmer photo by Des Keller)

By Des KellerProgressive Farmer Contributing Editor

Chances are 31-year-old Zach Adams cultivates relationships with his landlords so naturally that he doesn't even realize the amount of work involved.

OK, maybe not.

"Time spent on landlords is a year-round job," says Adams, who farms with his father, Dean, along the Minnesota/Iowa border, near Glenville, Minn. "The conversations with them during planting and harvest are just shorter."

"I think communication and honesty are the two things that make for a good relationship," says Adams, who returned from college to farm full-time 10 years ago. His landowners run the gamut from outside investors "who will never see their farm once" to retired area farmers who will "drive everyday by the farmland on which they spent 40 or 50 years of their life."

"Zach treats every parcel of land like it is his own," which is key for any ideal tenant, says Josh Gerig, an Iowa-based vice president with Murray Wise Associates, which buys and manages farmland across the country for investor groups and individual investors. Adams Grain Co. has worked with Murray Wise Associates for several years.

Gerig says Adams communicates effectively and when appropriate. "From a personality perspective, Zach is very upbeat and almost always positive about anything we discuss. Some operators seem to have a 'world's coming to an end' personality, which is never fun to deal with."

PERSONAL TOUCH

Adams doesn't have a one-size-fits-all approach to keep landowners in the loop. He doesn't publish a regular newsletter for landlords or have an annual get-together -- methods that have become more talked about in recent years.

"The people that are out of state, I'll email them pictures of the farm," he says. "We'll talk farm management, grain prices, inputs applied and what improvements need to be made."

Do they discuss rent as well? "That was the No. 1 discussion with landlords this past fall," Adams says. He's reticent to divulge the outcome of those discussions on his rents for 2015 other than to say "most landlords realized some sort of correction needed to take place for this year."

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Overall, the Adams operation pays straight cash rent to all their landlords on a year-to-year basis. "By far, that is the most popular way to pay around here," Adams says.

The Adams family takes good care of tenants' land and makes sure ditches are mowed and weeds along fencelines are sprayed. "We want to give the land a good curb appeal," Adams says.

LANDOWNERS' CHECKLIST

Gerig agrees the perception and image portrayed in how you run your own operation is important to landowners when evaluating tenants. He adds the perfect tenant is one a landowner or farm manager can envision working with for years. They want tenants who make life easier and are problem-solvers.

A great tenant should be pleasant to deal with and easy to contact, and should return calls or emails in a timely fashion. The best tenants can easily provide the requested documentation on a farm without hassle or too much delay.

Landowner needs differ from person to person. "We have landowners that will ask for the world in terms of yield and soil test maps, while others that just need a brief big-picture view," Gerig says.

As for sending a regular newsletter to landlords, Gerig says only about 10% of their producer/clients do it. "But that feature is one of the most talked-about pieces among tenants."

An operator needs to stand out to attract business, explains Mark Rhea, of Iowa-based Roach Farm Management. "What separates you from other operations?" he asks. "Are you up to speed on precision planting, or do you provide variable-rate applications?"

To interest any potential landlord through a farm-management group, a producer should have a list of equipment, a financial statement and letters of recommendation at the ready, he says.

FACE TO FACE

Andy Jenks, of Jenks Family Farms, Monmouth, Ill., doesn't produce a newsletter for his 40 landowners. However, he more than makes up for it with face-to-face visits three or four times per year.

"A big part of my job is to make those contacts for our operation," says Jenks, who adds that several landowners are up to 100 miles away from his home. "We want to generate a relationship there," he adds.

Jenks Family Farms did conduct a landowner-appreciation dinner five years ago upon completion of a new shop. "The get-together was very successful, with about 80 people -- landowners and their family members. It gave owners a chance to meet our employees, and everyone wanted to come see the new shop."

Rather than conduct that event annually, Jenks prefers them on special occasions -- perhaps when they complete a new grain-storage system later this year. "I think our one-on-one meetings are pretty important," he says. "That is a big part of my job in the summer and winter -- landlord meetings. Every year, they receive a booklet with information maps on yields, seeding and applications."

Having a good relationship with a landowner is helpful when things are tough. Minnesota's Adams recalls that continued heavy rains late into 2013 resulted in an inability to plant some fields.

"That was a tough call on some of them," Adams says. "The fact we have a good relationship helps with their being very understanding."

TALKING ABOUT THE "R" WORD

When it comes to rents -- whether they should be going up or down -- tenants need to be proactive in keeping landlords in the loop, explains Mark Rhea, who handles mergers and acquisitions with Iowa-based Roach Farm Management.

"As a tenant, you need to be up front to show these are what my costs are, and this is what I can afford to pay for rent," Rhea says. "The big thing is to lock in at a reasonable price." The best time to have these discussions is generally late July into August when most farm operations have slowed down a bit.

Being proactive is important, says Josh Gerig, of Murray Wise Associates. "In the past five years, there has been a lot of unlinking of trust between landowners and tenants. There were rents that stayed at $150 per acre when they justifiably should have gone to $400 per acre. Some tenants -- and the numbers were limited -- were not transparent with landowners about the prosperity of production ag and the commodity markets."

That hasn't been an issue with Jenks Family Farms, Monmouth, Ill. "We are very transparent about when times are good or not so good with our landowners," Andy Jenks says. "We were sharing with them when the times are good, and now, when commodity prices are down and margins are slimmer, we're both going to take a cut.

"These conversations are a lot easier when you've been fostering those relationships," he continues. "As a result, for me, it was an easy subject to talk about with them."

Overall, Rhea says the majority of 2015 rents he's familiar with remained similar to 2014 rates. About 20% of rents went up 5 to 10%, while about 25% of operations reported rents decreased 5 to 10%.

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